July 11, 2020 04:51

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CPTPP - Opportunities from tax policy for businesses

14:13 | 03/06/2019

VCN – CPTPP members are committed to abolishing 97% to 100% of tariff lines for goods imported from Vietnam to meet the rules of origin. Making good use of tax policy will be an opportunity for Vietnamese businesses to expand exports to CPTPP members.

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Tax will be abolished in the 13th year for new automobiles. Photo: T.H

Committed to eliminating nearly all tariff lines

Some tariffs were eliminated and reduced according to CPTPP. Under the agreement, CPTPP member countries are committed to abolishing 97% to 100% of tariff lines for goods imported from Vietnam to meet the rules of origin prescribed by the CPTPP (depending on the commitment of each country). This means Vietnamese goods exported to member countries will be exempt from or enjoy reduced tax in accordance with the commitment. Vietnam is also committed to eliminating 86.5% of tariff lines for goods imported from the member countries within three years.

Director of International Cooperation Department of Ministry of Finance Vu Nhu Thang said Vietnam is committed to eliminating nearly 100% of import tariff lines according to the roadmap: 65.8% of tax lines have a 0% tax rate after the agreement takes effect; 86.5% of tariff lines have a 0% tax rate in the fourth year since the agreement comes into effect (2021); 97.8% of tariff lines have a 0% tax rate in the 11th year since the agreement comes into effect (2029); the import tax on remaining items shall be abolished in the 16th year or in accordance with tariff quotas. In particular, the tax on new automobiles will be abolished in the 13th year, while automobiles with cylinder capacity of 3,000cc or more have a roadmap of tax abolishment in the 10th year. Tax will be exempted from temporarily imported goods as specialised equipment used for newspapers and television, software, radio and cinematographic techniques in accordance with law to serve trade and business activities or exhibition

Thus, according to the CPTPP, export tax on most items subject to export taxes will be eliminated according to a roadmap of 5-15 years after the agreement entries into force. However, some important commodity groups (about 70 items), such as coal, lignite, crude oil, gold, some kinds of ore, minerals; agricultural products including heading 12.11 plants and parts of plants used for processing pharmaceuticals, fragrances (ginseng roots, licorice roots and frankincense) continue to maintain export taxes.

To implement Vietnam’s commitments on export and import tax taxes under the CPTPP, the Ministry of Finance has proposed the Government issue a Decree on special preferential export tariffs and special preferential import tariffs of Vietnam in each stage from January 14, 2019 until December 31, 2022. The draft Decree has been received and finalised to submit to the Government after public consultancy.

Businesses should pay attention to the transitional content, due to the CPTPP taking effect for Vietnam from January 14, 2019. The Decree provides for tax treatment regulations for customs declarations registered from January 14, 2019 to the effective date of the decree. Accordingly, if a business is eligible for special preferential export tax, special preferential import tax and has paid tax higher than tax rates, the customs agency shall handle overpaid tax according to the law on tax administration.

Opportunity for exports

Deputy Director of Agro Processing and Market Development Authority under the Ministry of Agriculture and Rural Development Tran Van Cong said the commitment to cut taxes of member countries is opportunity for exporters. For seafood products, Canada eliminates tariffs on seafood products, especially Vietnam’s key products including: pangasius , shrimp, salmon , tuna, swordfish, crab and squid. Vietnam's agricultural products are eliminated from tariffs at the beginning of the implementation of the agreement including: rice and products containing rice, noodles, vermicelli, cassava flour, corn flour; key agricultural products including: coffee, green tea, black tea, pepper, cashew, fruit vegetables (fresh flowers, fresh and processed vegetables; tropical fruits and processed products), honey and sugar.

In addition, textiles and garments also have many export advantages to the Canadian market. According to Department of Import and Export under Ministry of Industry and Trade, Trinh Minh Hien, businesses made use of the rules of origin according to CPTPP regulations when exporting to Canada for two commodities as footwear and textiles and garments. If meeting requirements on origin, footwear exported to Canada will enjoy a 0% tax rate instead of the 18% tax rate. Textiles and garments also enjoy a similar tax rate. These are two items that are entitled to tax reduction right after the CPTPP takes effect, so many businesses actively study C/O to enjoy tax incentives in this market.

According to Japan's commitments at CPTPP, most of Vietnam's key seafood products such as frozen shrimp (HS 030617) and processed shrimp (HS 160521) are entitled to a 0% tax rate right after the agreement effective. Besides, items such as yellow fin tuna, striped tuna, swordfish, some species of cod, surimi, shrimp and crab also enjoy a 0% tax rate.

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Japan has entered the top 10 largest pangasius export markets of Vietnam, with the advantages from the CPTPP, this market is becoming a potential market of Vietnamese seafood enterprises, especially pangasius. In particular, some seafood products will be entitled to a 0% tax rate right after CPTPP takes effect, including pangasius products are immediately exempted from tax from the current 3.5-10.5%. Thus, with the advantages from 3 FTAs ​​with Japan, Vietnam pangasius exporters have more opportunities to increase exports to the Japanese market.

Export Tariffs in the CPTPP include 519 tariff lines. Vietnam is committed to abolishing export taxes on most items currently subject to export tax basically according to the roadmap from 5-15 years after the agreement comes into effect. Some groups of key commodities such as coal, oil and some kinds of ore and minerals (70 items) will maintain export tax. The conditions for enjoying preferential export tax rates under the CPTPP are transport documents and import declarations showing the destination being CPTPP member countries. Transport documents and import declarations are required to control goods actually imported into these countries' territory as prescribed due to that the export process does not apply the certificate of origin (C/O) as the import process.

The import tariffs include 10,216 tariff lines at the eight-digit level and 1,442 tariff lines at the 10-digit level. Regarding the commitment on import tax in the CPTPP, Vietnam committed to abolishing nearly 100% of tariff lines.

By Le Thu/ Huyen Trang